ANNUAL REPORT PRESENTATION

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ANNUAL REPORT PRESENTATION

• Celebrating a decade of water services delivery
  in a democracy

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ANNUAL REPORT H KASAN
TARIFFS K NAICKER
WATER BOARD ACCOUNTABILITY P CAMAY
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CONTENT

• Rand Water profile
• Customer Sales profile
• Sales trend
• Cost of raw water
• Projected input costs vs CPIX
• Gross profit
• Profitability

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CONTENTCONT

• Value creation
• Return on assets
• Business performance Indicators
• Performance Highlights
• Social responsibility trend
• Future developments
• Decade of Service Delivery - Review

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Rand Water profile

• Largest water utility in Africa
• Bulk water supply increase to 3 414 M? /d
  (3340M? /d 2003)
• Supplies 12 million people daily
• Sole area of service 18 000 km²
• 13 000 km² joint area of service with other Water
  Boards

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Rand Water profilecont

• Turnover R3 258 bn ( R2 884 bn 2003)
• Assets R5 232 bn (R4 892bn 2003)
• Staff employed 3 097 (3 108 2003)
• Corporate ISO 9001 2000 accredited
• All plants ISO 14001 accredited

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CUSTOMER SALES PROFILE
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SALES TREND
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COST OF RAW WATER
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PROJECTED INPUT COSTS VS CPIX
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GROSS PROFIT
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PROFITABILITY
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VALUE CREATION
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RETURN ON ASSETS

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PROFITABILITY

• Why generate large surplus (profit) ?
• Capital investment planned for next 5 years
  R2,5 billion
• To access funds (debt) at lowest cost to fund
  capital investment
• No loans from government
• No guarantees from government
• Ensure sustainability
• Not profiteering but recovering cost of capital

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BUSINESS PERFORMANCE INDICATORS
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BUSINESS PERFORMANCE INDICATORSCONT
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BUSINESS PERFORMANCE INDICATORS
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PEFORMANCE HIGHLIGHTS
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• Surplus R375 million
• Revenue R3 258 million
• Cash generated from operations
• Increase in sales

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9,1
2,2
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PERFORMANCE HIGHLIGHTScont
2003
2004

• Customer SLA evaluation
• Customer Satisfaction Index
• Training spend ( as of Total Payroll)
• Designated groups at management
• BEE spend

89
88
77
77
6,6
7
60
64
42,3
46
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SOCIAL RESPONSIBILITY TREND
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FUTURE DEVELOPMENTS

• RAND WATER SERVICES
• Providing water services value adding to
  municipalities in South Africa
• Back-up supply for SASOL R40 million pipeline
• NEPAD initiatives

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FUTURE DEVELOPMENTScont

• INFRASTRUCTURE PROJECTS
• BRAKFONTEIN/RUSTENBURG 80 KM PIPELINE R450
  million currently doing environmental impact
• WESTERN HIGHVELD REGION PROJECT
• R113 million of which R40 million is from Rand
  Water

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FUTURE DEVELOPMENTSCONT.

• A total of R2,5 billion capital investment is
  planned over the next 5 years
• R962 million in infrastructure development
  projects in progress

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DECADE OF SERVICE DELIVERY - REVIEW
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DECADE OF SERVICE DELIVERY

• Participated in Presidential Lead projects
  Winterveldt, Bushbuckridge (R142m)
• The project facilitated supply through 3 500
  communal standpipes benefiting approximately 1
  million people
• R215 million worth of projects implemented by
  CBPD
• Winterveldt sanitation project more than 2 540
  toilets for Winterveldt built (R8,3m) benefiting
  25 000 people

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DECADE OF SERVICE DELIVERY

• Integrated Water Demand Management Interventions
  R60 million
• Established Rand Water Services Pty (Ltd)
• Launched Rand Water Foundation
• Significant Transformation within the
  organization
• Designated group Management level
• 64 (33 2000)
• Women representation in management, professional
  and supervisory 28,2 (22 2000)

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RAND WATER IS

• IZANDLA ZIYAGAZANA

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Tariff Setting Accountability

• Rand Water
• Water Affairs Forestry Portfolio Committee
• October 2004

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ISSUES

• Municipal Financial Management Act 6 months
  advance notice
• National Treasury SALGA 40 days for
  consideration
• Bulk Water Supply Contract prior consultation
  and information sharing
• Core/Primary activity vs. non-core

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ISSUES Core vs. Non-core

• CORE
• Bulk Water
• Bulk Sanitation
• Rand Water Board

• NON-CORE
• Retail Water
• Community Projects
• Business Devt.
• Farm Operations
• Pipe Manufacturing
• Rand Water Services (Pty) Ltd

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PROCESS

• Aug. 2004
• Sept. 2004
• Sept. 2004
• Oct. 2004
• Oct. 2004
• Dec. 2004
• Dec. 2004
• March 2005

• DWAF raw water pricing
• Board prelim. approval
• Customer Consultation Information Sharing
• Board prelim. approval
• Submission to Treasury and SALGA
• Board final approval
• Customer Notification
• Parliamentary approval

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Water Board Accountability

• Presentation to the Portfolio Committee

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Introduction

• Water Board accountability covered by a number of
  measures
• Presentation covers the broad requirements of
• Water Services Act, 1997
• Public Finance Management Act, 1999
• Other requirements

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Water Services Act, 1997

• Water Services Act, 1997
• Water Boards are established in terms of the
  Water Services Act, 1997
• Executive Authority Minister of Water Affairs
  and Forestry
• Has principal oversight over water boards

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Water Services Act, 1997

• The Minister must review the provision of water
  services to water services authorities
• Makes recommendations to Parliament on the
  establishment, functions and disestablishment of
  water boards
• Must monitor operational and financial
  performance of water boards

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Water Services Act, 1997

• Oversight through Policy Statement
• In terms of Section 39(1) every water board must
  prepare and adopt a policy statement
• Policy statement must be submitted to the
  Minister, the relevant Province(s) and must be
  accessible to the Public
• The Minister can issue a directive for a water
  board to amend a policy statement

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Water Services Act, 1997

• Oversight through 5 year Business Plan
• Section 40 requires water boards to prepare and
  adopt a five-year business plan
• Business plan must be submitted to the Minister
• The Minister may require a water board to amend
  its business plan

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Water Services Act, 1997

• Oversight through Annual Statements
• Section 44 requires a water board to issue an
  Annual Report and audited financial statements
• The Annual Report and audited financial
  statements must be submitted to Parliament
• Numerous other obligations range from
• Ring fencing of additional activities
• Discontinuation and limitations of water services
  

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Water Services Act, 1997

• Policy statements, business plans and annual
  reports appraised annually by the Department of
  Water Affairs and Forestry and findings presented
  to the Minister to inform decision making
  regarding water boards

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Appointment of Board Members

• Board members appointed by Minister of Water
  Affairs and Forestry
• Schedule 1 of the Act provides the procedure for
  the appointment of Board members
• Constitution of a selection panel
• Consists of Chief Executive, Provincial
  representative(s), Ministerial representative and
  Person of good repute within service area
• Call for public nominations for Board members in
  water boards service area
• Selection panel makes recommendations to the
  Minister

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Appointment of Board Members

• Section 35 requires
• That the Board must be representative of water
  services authorities that receive services from
  the water board
• Other interests served by the Board are
  represented
• Broad population is represented
• Local Government representation determined
  through consultation by the Minister with
  relevant organisations in the service area that
  represent municipalities (the South African Local
  Government Association etc)

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Appointment of Board Members

• Previous Rand Water Board consisted of
  representatives from
• Municipalities
• Women
• Men
• Current Board has Representatives
  municipalities women men
• Municipalities 7
• Women 7
• Men 12
• One member of Provincial Legislature also
  included

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Public Finance Management Act, 1999

• National Treasury also has oversight over
  financial performance
• Minister of Water Affairs and Forestry given
  executive authority over water boards

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Recent Developments to Monitor Water boards

• Shareholders compact in terms of Treasury
  Regulations Act
• Quarterly reports in terms of Treasury Regulations

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Shareholders Compact

• It is a requirement of Treasury Regulations
• May 2002( Regulation 29.2 )
• It sets parameters of the relationship
• Includes performance measures and indicators
  which must be attained by a water board

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2. Quarterly Reports

• Are a requirement of Treasury Regulations May
  2002 (Regulation 29.3)
• The purpose is to monitor and evaluate
  performance as contained in the Shareholders
  Compact
• To effect timeous corrective action

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Other Mechanisms to Ensure Accountability

• New National Task Team led by Department of
  Public Enterprises to strengthen regulatory role
  of government over parastatals
• Development of mechanism to monitor Board
  performance
• Ensure good corporate governance
• Bulk Water Services Model Contract
• Borrowing Limits set by National Treasury
• Adherence to King II on Corporate Governance
• Reporting to Portfolio Committee as and when
  required
• CE salary

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THANK YOU